You’re Gonna Wish You’d Kept Up with the Book Club April 21, 2011

Say, I got an idee. I was reading some economic stuff today, and wishing that I had a better background in macroeconomics so I could hammer on the Keynesians more effectively. Then I remembered that MIT has posted pretty much all of its course material online, including 14.02 Principles of Macroeconomics. So I was thinking:

Anybody want to go through the course with me?

I looked at the first lecture, and it was kind of annoyingly chatty but not too dense. There are 24 lectures in total: maybe we could do one a week, varying the pace for the difficulty of the content?

I know this is probably doomed to failure, if it takes off the ground at all. But I thought I’d ask anyway.

I’m willing to try. A few months ago I tried watching The Great Courses DVDs for economics at lunch and bombed out after about the first three lectures. It wasn’t intolerable, I just didn’t stick with it. You can use my free beer ration as leverage on other recruits.

Answer No 1: The fundamental precept of economics is scarcity. There is not enough of anything to make everyone happy.

Answer No 2: In a world of scarcity, Wealth = Natural Resources * Labor * Mutually Beneficial Exchange. The third factor, trading, is by far the most important engine of wealth, dwarfing natural resources and labor. Great advances in wealth have largely occurred by enabling exchanges, e.g., Roman roads, English maritime power, etc. The greatest enabler of exchange is a trusted currency. The Medici family in Venice were the first ones to recognize this in a big way, and they invented banking as a method of artificially stored wealth (as opposed to salt, precious metals, spices, seashells, etc.)

Answer No 3: Wealth is stored utility. Utility is personal and cannot be measured. There is no way to measure what an apple is worth to you, compared to what a peach is worth to me. Money is a proxy for utility, because it enables mutually beneficial exchanges, and it can be measured. You can observe what I will pay for your peach, and you will pay for my apple.

Answer No. 4: However, the marginal value of money declines in value as wealth increases, like any other good. So, the measure of wealth for any person can only be approximated by money. A marginal dollar for a billionaire is worth less than a marginal dollar for someone on food stamps. Thus, taxing the rich is a seductive proposition, until the rich find refuge elsewhere.

Answer No. 5. However, money itself can fluctuate in value depending on supply, which depends upon the integrity of the currency of exchange. Money is basically a debt owed by the sponsoring authority. It’s value depends upon it’s integrity, which can be ruined by oversupply and confiscatory taxes.

Answer No. 6: A system of mutually beneficial exchanges requires (1) the rule of law, which protects (2) private property rights, and supports (3) public infrastructure and (4) the currency.

Answer No. 7: Obama sucks. He is systematically trying to destroy the rule of law, property rights, the public infrastructure, and the dollar.

Consider education, for example, which most of us would regard as a critical part of our infrastructure. All available evidence suggests that the appropriate agency to supervise this function is the family, which in turn can control local, state and church institutions that deliver the service.

Liberals fundamentally do not trust families. They trust federal bureaucrats and public sector unions. Not because they are competent, but because they can debauch the value of money for their own benefit.